Monday, June 27, 2011

Truck tonnage fell in May, most likely due to supply-chain interruptions and higher oil prices. Calculated Risk has more details. I offer this updated chart to show how closely the stock market, not surprisingly, tends to follow the ups and downs of the physical economy. I also note that truck tonnage is a very real indicator of economic growth, and can't be artificially elevated by cheap money or misguided stimulus programs.

Trucking serves as a barometer of the U.S. economy, representing 67.2% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods.

It's reasonable to expect that supply-chain disruptions are now fading, and that, combined with a 20% drop in crude oil prices over the past two months, should allow somewhat stronger growth to resume in coming months.

Wiemar Republic? With with PCE deflator running at 2.3 percent? PL, there were whole decades that if we had 2.3 percent inflation, that would have been greeted with open arms, and hosannahs for "beating inflation."

Reagan "beat" inflation and it was more than 5 percent when he left office.

And prices are probably cooling off now, what with oil taking a huge hit lately. Unit labor costs have been down or flat.

We cannot become a Japan or a Wiemar Republic--you gotta choose one doom scenario. They don't go together.

And Wiemar is out. No Fed chief would print money like that.

That leaves the Japan scenario--and we are on our way there.

We know what happens if you put inflation-fighting in front of economic growth. It is called Japan.